Canadian analyst predicts all-time low for the loonie

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By Steve Guntli

The value of the Canadian dollar may drop to an all-time low by the end of the year.

The loonie slipped to 69.9 cents on the U.S. dollar on January 11, the first time it’s dipped below 70 cents since 2003, and Canada’s top-ranking forecaster says the decline hasn’t stopped.

David Doyle is an analyst for the Macquarie Capital Markets Canada Ltd. He was ranked the most accurate forecaster of the Canadian dollar by Bloomberg News and accurately predicted the loonie’s current decline to 69 cents in February 2015.

Doyle predicts the loonie will drop to 59 cents on the dollar by the end of the year. This would be an all-time low; the previous low was 61.1 cents in 2002.

The drop in the price of oil has been a major contributor to the loonie’s decline. Crude oil is currently priced at $27 a barrel, the lowest it’s been in 13 years. Since the mid-1990s, oil has become one of Canada’s main exports, and provinces like Alberta and Newfoundland, with their rich oil reserves, have been hit hardest by the loonie’s decline.

“You could imagine the situation is worse today than it was in the 1990s,” Doyle said in an interview with the Financial Post. “We’re much more dependent on oil than we were in the past.”

The impact of the declining loonie on the economy in Whatcom County has been difficult to quantify. According to a study from Western Washington University’s Border Policy Research Institute, fewer Canadians are crossing into the U.S. to shop.

The study showed 20 percent fewer crossings in 2014 than in 2013, and a 1.4 percent decrease in retail sales in Whatcom County for 2014. However, gas will likely continue to be an attraction, as will mailbox services in border towns such as Blaine, according to WWU professor Hart Hodges.

The outlook for the loonie will likely remain poor. Doyle expects the trend will continue at least through 2018.

“Manufacturing and non-energy exports have far less ability to propel the economic outlook than they have in the past,” Doyle said. “Many of our oil and oil-related sectors have grown, and a lot of our manufacturing sectors have not grown and remained low.”

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